Anders Fremstad, Oakley Brooks & Elise Furlan

WHOSE SHARING ECONOMY IS IT?

One economist couch surfs and parses the literature to figure out who's benefitting from the exploding sharing economy.

Q & A with Anders Fremstad

 The sharing economy is hip. AirBnB, Uber and Couchsurfing are on the tip of everybody’s tongues. But in the rush to rent or recycle everything within arm’s reach, what kind of world are we actually building? Researcher Anders Fremstad, a Couchsurfer and host himself, looked closely at Craigslist, Couchsurfing and a new start-up, Neighborgoods, to find out what kind of returns these new sorts of transactions deliver. He also explored how we could shape the sharing economy to better serve us in the long run.

Oakley Brooks: What was the most surprising thing you found as you looked into online sharing platforms?

Anders Fremstad: I am really impressed by how platforms like Couchsurfing and Neighborgoods are harnessing the power of relationships in a way most companies don’t.

My hope would be that they can help us build a world where we are a little more socially and economically interdependent and connected. I think that is what we need in order to meet some of the environmental challenges of this century.

And how do these online platforms harness the power of relationships?

Craigslist is really interesting—I think it has had a large impact on reducing waste. But it has also pushed us the least in terms of how we relate with one another.

Couchsurfing has facilitated millions of nights of lodging for its members. One study {Lauterbach et al.} suggests that between 12 percent and 18 percent of stays are directly reciprocated. A lot of these people crashed with someone somewhere and they became close enough friends that they said, ‘Hey, we should see each other again,’ and they made it happen within the next couple of years. Extrapolating from this statistic suggests that Couchsurfing has generated hundreds of thousands of friendships, and that is just enormously exciting.

What Neighborgoods is trying to do is build more sustained relationships within neighborhoods, churches and work places, and change the way we think about depending on one another for some items so that we don’t have to own everything ourselves. They haven’t yet had the same level of success, but I think there is a desire for a lot of Americans to build a deeper community.

But sharing isn’t a new concept for societies, is it?

No. Incentives to cooperate are stronger for people with limited resources. If you go to a poor country, not every household has two cars, and as you watch the cars going down the streets they are more likely to be full of people. It’s a much less environmentally destructive transportation system and that is because people can’t afford to keep a couple of cars in the driveway for 23 hours a day. The American system is just economically wasteful, and we’re starting to recognize that here.

So there’s a mix of long term relationship building and straightforward economics. Tell me more about the economic advantages these platforms bring to users and who’s benefitting.

All these platforms are reducing the transaction cost of different sorts of interactions. If you want to get rid of your couch, it used to cost something to post it in a newspaper classifieds. If you didn’t think you could get at least fifty or one hundred bucks, there was no point in doing it, right? So you just put it out on the curb.

But what Craigslist has done is eliminate a lot of that cost. Posting a couch is now free, and you can post way more information and photographs than you could ever put in a newspaper. This has increased the number of transactions, and it has increased the consumer surplus from those transactions. A disproportionate number of the benefits of those transactions have probably gone to people with lower incomes who are more likely dependent on both sides of that market—selling things that they don’t use any more and buying used items instead of new ones.

A 2014 poll by the Center for a New American Dream shows lower-income people are slightly more likely to use sites like Craigslist and Couchsurfing, despite the fact that they have significantly worse access to the internet.

 In your experience, who is Couchsurfing?

Couchsurfing is distinctly not upper income (laughs). A lot of people that choose to stay with me in the college town of Amherst, Massachusetts are younger, educated people who may one day make some money, but who aren’t yet.

What is interesting is the variety of backgrounds that people come from. I have hosted people who are basically homeless, who needed a place for a couple of days and were moving on to another city. A couple of months ago I hosted someone who worked for the national Olympic committee in Austria. He knew that by Couchsurfing he would get a better sense of what the community was like, what the university was like, and it would help him build the connections that you can’t necessarily get if you stay in a hotel.

Tell me about the homeless person who came through.

She was a middle-aged woman struggling to make ends meet. She was from a neighboring state and she heard that there might be better opportunities around Amherst, so she came to see what it was like.

On Couchsurfing it goes both ways. When my family and I were traveling in Vermont, a family living in a very simple home invited us to stay at their place, even though they weren’t home at the time. It was people who were just getting by. The trust and generosity they displayed by welcoming us into their home was really an eye-opening experience for me.

My family lives in 500 square feet here. It’s not a luxurious place for people to come and crash, but people are still grateful to stay with us. We’ve made a lot of friends over the years.

So Couchsurfing offers an opportunity for people to expand networks.

At the beginning of every semester usually there are quite a few requests in [Amherst] because a lot of people are coming from another country. It’s hard to rent a place from abroad, and they don’t have any idea of what it’s going to be like.

We had a couch surfer who stayed with us in early September at the beginning of the semester from Germany, and last night he came over because he wanted us to meet his sister, who was visiting him for a few days here before traveling on to Boston and New York.

That is a friendship that never would have happened without some sort of platform like Couchsurfing. I think that the nonmarket nature of Couchsurfing makes it more natural to move on into a friendship.

You suggest that these types of relationships will benefit society, especially as environmental limits are hit and we face down big problems.

I don’t see how it can be bad for people to learn how to rely on one another a little bit better. I think the cross-class and cross-cultural component of Couchsurfing is incredibly powerful. You can meet people from all over the world just by staying put or you can travel all over the world with people for free.

On the environmental side, the international negotiations around climate change are going to require unprecedented cooperation on a global scale. And I think that will require these personal relationships as much as it’s going to require politicians to come together and agree to something. They are ultimately decisions based around broad-based trust.

Speaking of trust, do these platforms require a heightened level of trust in the public, by the public?

I think the platforms are more used by certain sorts of people, people who tend to be more open, more trusting, more willing to try something new.

But as online platforms become more ingrained in everyday life, and as they construct online identities and reputation, there might be more of a role for the users and members to determine how we decide what sort of things are shared and what sort of things aren’t.

Do you think there should be a very public process of governance and even ownership of these platforms? There’s precedent for that, with public utilities. Is that what you’re thinking?

With electrical and water utilities, the argument for public ownership is that these are industries that have strong economies of scale. Building power lines to the first house costs a lot, but then connecting the next house costs much less. What’s called the marginal cost of each transaction is really low, even though there are high fixed costs to start. It doesn’t make sense to have lots of private firms build power lines to each house—it would be a waste.

The economies of scale are, if anything, even more extreme with these 21st century sharing economy platforms. It costs a lot to invest in these sites and make them work, but the marginal cost of the transaction is basically zero. And in fact the platforms improve as the number of users and transactions increase. Once any platform becomes the go-to place, it essentially faces no competition.

It’s important for us to start thinking about how the public is going to have some say in how these platforms are run. When you look at something like Uber [the taxi service run on users’ personal vehicles] for example: there’s nothing guaranteeing that they are going to treat consumers and drivers well in the years to come.

They become too big to regulate at some point, as well. We’ve seen this recently with Uber here in Portland; the company defied a city ban by coming in and operating for a few weeks. And it forced the city to relent on the ban and negotiate terms of operation.

Uber is a young company that already has so much power over local governments. We need to start thinking about what the public’s role is going to be in these 21st century utilities.

It sounds like you are seeing the sharing economy as a mixed bag with a lot of potential that needs to be watched, regulated, and steered toward broad benefits?

Some people on the left have criticized the sharing economy as being a terrible thing that leads to the expansion of markets that will produce a new “precariat” class that survives one gig at a time. The argument is that folks will have to rent and lend out everything they own just to make ends meet. I don’t really buy that. I think a lot of the things we have seen on platforms like Craigslist and Couchsurfing really help people with low incomes get by.

But on the other hand I also can’t really support the folks on the right who celebrate every aspect of the so-called sharing economy. I think we do need to think about the structure of the firms, and to what extent they encourage the participation of workers and members.

Where does the sharing economy go next, and how do we keep up with it?

One area that is going to continue to grow is car sharing. I don’t believe that 20 years down the line most Americans are going to own a car that they use for one hour a day. We have the technologies we need right now to no longer do that, and by sharing cars and sharing rides we are going to have ways that we can spend less money on transportation, protect the environment and, if we do it the right way, have some positive social elements.

On the other hand, if Americans don’t figure out how to get along with one another enough to pick each other up and drop each other off using cooperative platforms, then I think that someone else will figure it out.

Google will build a little army of robotic taxis that will do it all for us.

Two visions of the future.

Exactly.